3A Better Together?

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Better together?

Richard Davies

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Whilst every effort has been made to ensure accuracy,

Liverpool Charity and Voluntary Services accept no liability for any loss suffered as a result of following any advice contained

in this document.

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Why is the sector looking at collaboration?

• Survival: financial/governance• Response to commissioning and

contracting or funding bodies• Meet beneficiaries’ needs better• Greater influence• Expand range of services• History of collaboration

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Defining collaboration

‘Any situation in which people are working across organisational

boundaries towards some positive end’ Huxman and Vangen 2005

‘Working jointly to meet agreed outcomes and adding value that would

not be achieved independently’

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Benefits of collaboration

1. Sharing of skills, knowledge, resources2. Reducing delivery overheads 3. Sharing best practice4. Sharing of risk5. Developing new or improved services6. Encouraging innovation7. Increasing organisational capacity8. Improving competitiveness9. Strengthening market position10. Promoting greater choice in services11. Improving provision for service users12. Enhancing organisational profile13. Enhancing customer service14. Creating long-lasting, fruitful partnerships15. Sharing expertise and learning across the sector16. Promoting sustainability

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Challenges to collaboration

1. Time

2. Legalities (need to check if can work in partnership), Legal fees

3. May be driven by funders and not be providers themselves

4. No clarity on driver(s) for collaboration

5. Risks e.g. damage to reputation if it goes wrong

6. Getting buy in – from boards, staff, funders

7. Will it really deliver the desired outcome?

8. Organisational culture

9. Reduced independence and autonomy

10. Loss of identity

11. Performance management

12. Finding the right partner/organisation to collaborate with!

13. Data protection

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Challenges to collaboration…?

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Some different forms of collaboration

INFORMAL FORMAL

Joint service delivery• Lead body

Mergers• Setting up new

organisation (both entities dissolve into it)

or• One organisation joins the

other

‘Encounters’• Networks / networking• Forums

Joint service delivery• Consortium

Joint service delivery• Partnership agreement

Sharing back office services

‘Encounters’• Loose partnerships

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Formal and informal

1.Informal e.g. networks, forums, loose

partnerships

‘encounters’Sharing of intelligenceNo formal/legal agreement in place

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2. Formal

• A. Joint service delivery – lead body• One organisation leads on the contract, and delivers it in

partnership with others

• B. Joint service delivery - Consortium • Separate organisations work together to achieve a common

aim, usually a piece of work or contract. • A new legal organisation may be set up; but individual

organisations maintain their own identity and core business and are ‘members’ or partners.

• Formal agreement in place with clear roles on who is the lead body (organisation who bids for the work), and delivery agents

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C. Sharing Functions• where similar organisations link up to share:

• Processes e.g. HR, finances• Resources e.g. office space• Services e.g. expansion into new geographical

area

Formal agreement/contract in place

Also known as clustering

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Partnership agreements

1. Name Vision and specific aims or objectives

2. Allocated duties (delivery of different elements etc.)

3. Admin (record keeping etc.)

4. Membership

5. Conduct of Business – e.g. meetings/quorum

6. Decision-making processes

7. Funding/investment

8. Dispute resolution

9. Performance management

10. Management and administration of the partnership

11. Stakeholder engagement

12. Communications

13. Intellectual property

14. Amendments

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D. MergerTakes different forms….

One or more organisations close and dissolve into an existing / another one

• Not always the right choice, but one that involves the most detailed consideration

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3 key stages to merger

1. Groundwork Compatibility (beneficiaries/objects/values/policies)

Heads of terms/confidentiality agreement Consultation Future management structures

2. Due Diligence Financial/legal/operational/cultural

3. Completion Merger agreement Practicalities (pre and post) e.g. assets/staff etc

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Basic Merger Structures: Asset Transfer 1

A B

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Asset transfer 1

• B assumes assets/liabilities of A• A closes down• Therefore good due diligence vital• Simpler/cheaper resulting

governance and management structure

• Feels like a takeover (but it needn’t)

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Basic Merger Structures: Asset Transfer 2

A

B

C

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Asset transfer 2

• New vehicle set up• Assets/liabilities of both A/B transfer to

new vehicle• Both A/B dissolve• Same issues as Asset Transfer 1, except:

Feels less like a takeoverMore expensive

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Basic Merger Structures: Group 1

B

A

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Group 1

• A parent organisation governs a group of subsidiary organisation • Both retain their own legal identities• Organisation A becomes a holding company for Organisation B • Changes made to A to accommodate some new trustees, staff,

assets or projects from B• Can be used to maintain the services Organisation B • Organisation A protected from any risks arising from Organisation

B by creating a 'firewall' • Organisation B continues to operate as a separate legal body,

albeit one controlled by the trustees of Organisation A• The relationship may continue indefinitely or may be an interim

stage prior to full merger

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Issues with Groups

• Tighter than mere contract arrangements• Cheaper to establish• No transfer of liability• More complex governance and management• Easier to persuade boards?• Useful stepping stone?• Reversible• Does it solve financial problems?

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Due diligence

• ConstitutionalObjectsPowersMembers

• Structural Corporate/unincorporated

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Due diligence: staff

• TUPE• New staff structure?• The new CEO?• Pensions

Defined benefit pension schemes Deal breaker?

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Due diligence: contracts/funding

• Contract of funding agreement• Consent (funding agreements)• Assignment v novation (contracts)• Risk – value?• Third party suppliers

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Due diligence: land

• Freehold/leasehold propertyRestrictions on dispositionChargesCondition

• Permanent endowment• Other special trusts

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Due diligence: other issues

• Intellectual property e.g. brands• Data protection e.g. consent to transfer• Litigation/disputes• Insurance• Information technology• Trading company• Investments• Tax/VAT

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Mergeragreements

• Warranties and indemnities Purpose Importance of due diligence process

• Conditions Regulators – consents/registration Consents from funders/contractors Member approval

• Pre-assignment/novation/consent• TUPE• Announcements

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Post merger

• Notifications Banks Contractors Regulators Register of charity mergers?

• Final accounts• Winding up/striking off (NB

Legacies)

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Tips for collaboration

• Agree a shared vision• Strategic and organisational fit• Must be a business case• Leadership• Recognising human factors• Good communications e.g. consult staff and service users• Identifying deal breakers• Clear plans for process and beyond• Establishment of clear partnership / collaboration

arrangements• Sensitivity to different organisational cultures

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Key message

• There are many ways to collaborate• Formal or informal• Merger is not always the answer• Start a dialogue early• Give yourself time• Don’t be afraid to end negotiations

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Further advice

• (0151) 227 5177• 151 Dale Street• L2 2AH• [email protected]

Merseyside Business Support Project